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Grid Parity by 2016: Can We Get There?

Grid parity is often cited as sort of a holy grail in the solar industry. Essentially, grid parity is the point at which the cost of solar energy equals the cost of utility power from coal, natural gas, nuclear, etc. When reached, there will be massive demand for solar energy as the cost barrier crumbles. It won’t happen all at once -- local differences in energy costs, transport and demand all play a role in solar power’s cost competitiveness. Definitions of the term even vary; some say parity should be considered met at the cost of generation, others at that cost less distribution and transmission, and still others believe it is at the retail cost.

I am in the last camp. We, the solar industry, will be “even” when a customer sees the same price for solar on his monthly bill as the utility company charges. It is at this 'tipping point' that we will see the true potential of this industry unleashed. Although grid parity won’t happen all at once, it is happening in stages. The point is not too far away in many areas of the country, and is already reached in a few places, namely Hawaii, some high-rate paying areas of California, Puerto Rico and the Virgin Islands. People with solar on their roofs, tied into the grid, will reach parity before utility-scale projects with longer transmission distances and storage considerations.

So why is the question of when so important? Mostly, it’s about momentum. Right now, solar has it. Partly due to the falling prices of solar modules, economies of scale and the foresight of legislators who passed favorable tax incentives, the market for solar power has never been stronger. But just as prices are leveling off, some of those tax incentives are going, or have gone, away. A major one, the 1603 Treasury grant program, expired at the end of 2011. The other important incentive, the 30% investment tax credit for homeowners and businesses, is due to expire at the end of 2016. At that point, the solar industry must be cost competitive in a number of markets, or risk stalling out.

If we can reach grid parity by then, solar will be in a position to compete, without further incentives or subsidies. It is an important goal for the continued growth and success of the solar industry and the future of renewable energy in this country. By 2016, we must have grid parity in several states at the retail cost of power, because then the industry will have the traction to realize it everywhere.